Firms eager to buy nursing homes, despite deficits

By Michael Sadowski,
March 4, 2014 at 4:00 PM

While Lebanon County commissioners delve through information to help decide whether they should sell Cedar Haven Nursing Home, the line of private companies ready to buy the facility goes out the door.

Representatives of six private health care companies have met formally with the commissioners to express interest in buying the facility, despite a county subsidy totaling more than $20 million since 2003 just to keep it open.

Lebanon County is facing a decision other Pennsylvania counties have tackled, as county-run nursing home facilities have been sold to private companies that medical officials say can run them more smoothly and efficiently.

"I would say in almost every case, from all the data that I have viewed, that when a county sells or brings in a private provider, the care is enhanced, the workers keep their jobs and it saves the county money," said Stuart Shapiro, president and CEO of the Pennsylvania Health Care Association. "The transitions are usually very seamless, and care continues to the county residents without dropping a beat."

That comes from a Lebanon County-commissioned report examining the financial status of comparable nursing home facilities in the state. The report was completed by Griffin Financial Group LLC, which has offices in Lancaster and Reading.

Cedar Haven is valued between $15 million and $20 million, according to Jamie Wolgemuth, Lebanon County's chief clerk and county administrator.

The county expects to pay about $4.4 million in 2013? to support the facility, according to a separate efficiency report approved by the commissioners that also tallied the $20 million spent over the last decade.

Prior to 2003, the county had not made any payments for the operation of the home, according to the report from Complete HealthCare Resources-Eastern Inc. of suburban Philadelphia.

In 2013, according to the Griffin report, Beaver, Blair and Franklin counties sold their nursing homes to private companies.

Private health care companies have more access to buying in bulk, have long-standing relationships with vendors and often have more-efficient staffing methods that allow them to save money, health care officials said.

"County commissioners have many areas of responsibility within a county, and it is nearly impossible for someone to be in a position in county government and become an expert in nursing home operations," said Lisa Defibaugh, vice president of business development for Complete HealthCare, which manages Conestoga View Nursing Home in Lancaster County and the Berks Heim Nursing and Rehabilitation Center in Reading.

Walter Kielar, senior vice president of Kennett Square-based Genesis HealthCare, which manages the county-owned nursing home in Bucks County, said the workforce at a county-owned facility is normally unionized and commands higher wages than a workforce at a private company.

Sue Morey, vice president and general manager of HCR ManorCare, which has dozens of elder-care facilities throughout the midstate, also said unionized employee wages drive up the price of managing a nursing home. Private health care companies focus only on health care management, where counties have dozens of other responsibilities, she added.

"We're very efficient with our vendors," Morey also said. "We're very supply conscious, our inventory is near-perfect for what we use. This is what we do, and we do it very well. Someone that's not used to specifically running a nursing home might not know how to manage it."

As medical costs rise, state and federal reimbursement rates for Medicaid have not followed, adding to the financial difficulties county nursing homes face. According to a report released this month by the Pennsylvania Health Care Association, the average shortfall in Medicaid funding is $25.92 per day per patient. That's about $9,500 a year per patient who pays through Medicaid.

About two-thirds of patients in Pennsylvania use Medicaid for their nursing home bill, according to Alison Delsite Everett, spokeswoman for the association. The association is lobbying for $16 million in additional state funds in the 2014-15 state budget for facilities that serve a higher-than-average percentage of Medicaid residents.

Lebanon County Commissioner Jo Ellen Litz is fighting to keep Cedar Haven in county hands to protect it as a county asset. She said there are enough ways to run the nursing home more efficiently — spelled out in the efficiency report — to make sure it doesn't lose money for the county.

A new company, she said, could make additional cuts to make the home profitable. She also suggested Complete HealthCare could manage the home so the county could keep ownership.

"Once it's sold, it's gone forever," she said of the facility.

Shapiro said when a county sells a nursing home facility, there is a fear from the public that the level of care will diminish, and employees worry about losing their jobs. In almost all cases, however, he said neither has happened.

"Counties are very good at many things, as are city governments," he said. "One of the things they're not experts at is running health care facilities."

Is York County’s nursing home in dire straits? Depends on whom you ask

Pleasant Acres Nursing Home, which is run by York County, had a net operating loss of almost $9 million in 2012, according to a report compiled by Griffin Financial Group LLC for the Lebanon County commissioners, who are evaluating their own county-run nursing home.

But York County President Commissioner Steve Chronister says the figure, which he said was provided to Griffin and FS&L by county Controller Robb Green, was inaccurate.

“It’s a $3 (million) to $4 million dollar deficit,” Chronister said. “It depends on the way you look at the numbers.”

That is a manageable deficit for the county, Chronister said, especially since Pleasant Acres is providing good care for those occupying the 375 beds at the facility.

But Green stands by his numbers. The county contributed $9.1 million to keep the facility operational in 2012, he said, and the commissioners’ view of the deficit does not take into account certain figures required by modern accounting practices.

For example, Pleasant Acres saw a $900,000 cost for depreciation.

“They don’t budget for depreciation,” Green said.

Nevertheless, Chronister said there are no plans at this point to alter the way the facility is operating, such as selling it to a private firm.

“In York County, the general public feeling of selling the nursing home to a private home would probably be political suicide,” he said. “It is seen as a safety net for our residents. And as far as I’m concerned, it is a well-run facility.”

Noting the county’s growing elderly population, as well as its blue-collar background, Chronister said the facility is seen as necessary.

“Nobody complains that we spend $8 million to help fund Child and Youth Services,” he said. “This is a cost of doing business. ”

Green said he understands the political viewpoint Chronister is taking.

“But the bottom line is the nursing home is being subsidized by the county general fund significantly in York County,” he said. “You can argue the numbers, but it is a very expensive operation.”